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Zynga (ZNGA) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
·3 min read

Zynga (ZNGA) closed the most recent trading day at $9.61, moving -1.23% from the previous trading session. This change lagged the S&P 500's 0.22% loss on the day. Elsewhere, the Dow lost 0.23%, while the tech-heavy Nasdaq lost 0.38%.

Heading into today, shares of the maker of "FarmVille" and other online games had gained 17.94% over the past month, outpacing the Consumer Discretionary sector's gain of 5.73% and the S&P 500's gain of 2.78% in that time.

Investors will be hoping for strength from ZNGA as it approaches its next earnings release. On that day, ZNGA is projected to report earnings of $0.09 per share, which would represent year-over-year growth of 125%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $674.64 million, up 55.66% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $0.38 per share and revenue of $2.25 billion, which would represent changes of +3700% and +43.58%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for ZNGA. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. ZNGA is currently a Zacks Rank #3 (Hold).

Investors should also note ZNGA's current valuation metrics, including its Forward P/E ratio of 25.86. Its industry sports an average Forward P/E of 34.52, so we one might conclude that ZNGA is trading at a discount comparatively.

Meanwhile, ZNGA's PEG ratio is currently 1.48. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Gaming industry currently had an average PEG ratio of 1.27 as of yesterday's close.

The Gaming industry is part of the Consumer Discretionary sector. This group has a Zacks Industry Rank of 127, putting it in the top 50% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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Zacks Investment Research